The Blame Game: Is It Payroll or Inefficient Company Practices?

Payroll departments often receive the most blame when payment errors occur, even if the mistake was caused by incorrect data from outside the department, two industry experts said July 10.

Processing payroll requires certain data from employees and human resources, such as salary amounts and information provided in Forms W-4, Employee’s Withholding Certificate, said Joe Ranzau, Managing Director for Grant Thornton LLP. However, some of this information is provided by employees and human resources through the onboarding process, which is often outside the purview of a company’s payroll department.

“The number one and number two reason for payroll errors are [untimely] employee data changes and inaccurate employee data changes,” added Jesse Leder, Senior Manager of Payroll Transformation at Grant Thornton LLP. “These are fields and processes outside of the control of payroll.”

These data errors have serious consequences for payroll departments and their companies, said Ranzau during PayrollOrg’s Virtual Congress. Employees might not get paid on time, which could decrease job satisfaction and lead to fines or penalties. Payroll departments might need to resolve issues while handling their normal responsibilities, causing increased costs and off-cycle transactions.

For example, a manager might have promised a pay raise for an employee effective Jan. 1, but the company does not approve it until February, said Leder. In this case, the payroll department would have to provide retroactive pay, and the employee would incorrectly blame the department for the late payment.

Inefficient companywide practices create problems and inefficiencies for payroll departments, and payroll departments should notify company leadership of these issues, Ranzau added. Notifications should include the business costs associated with maintaining the status quo. Payroll departments should also track and categorize issues to support the policy changes they propose to company leaders.

Tracking issues is useful for companies to identify the root cause of the problems and determine how to resolve them, added Leder. Common root causes include the existence of multiple processes that serve the same function, faulty processes that require excessive manual work, and a lack of understanding of how payroll data is used.

“We often see in many instances [that] payroll has created a manual process that may no longer be relevant, or there may be a lack of trust that human resources is processing data in a timely manner or in an accurate manner,” he said. “Sometimes, there’s a lack of awareness. No one knows why we do it this way; it’s just how we’ve [always] done it.”

When an issue and its root cause are identified, the payroll department should simplify the situation for company leadership, offer alternative policies or practices, and explain the impact that the proposal would have on the business, said Ranzau.

“What’s going to resonate with [leadership]? Tying it to the business,” he said. “Usually within payroll, it’s cost avoidance and risk avoidance. We’re rarely able to save significant sums of money unless we have massive overpayments or regulatory fines.”

Some positive impacts worth mentioning to leadership include faster processing times, increased automation of certain tasks, or higher accuracy of employee payments, he suggested.

“It’s on us to create that awareness and buy in. We have to go to our stakeholders and leadership and meet them where they are at,” he said. “Documenting and understanding the issues and translating it into telling your story.”